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A Sharp Rebound

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A healthy rebound characterized the August 2012 ferrous scrap buying period, after two months of falling prices.

Recycling Today Staff September 7, 2012

A healthy rebound characterized the August 2012 ferrous scrap buying period. After two months of falling prices, ferrous scrap processors and shippers received a healthy amount more for ferrous scrap sold on the spot market in August.

According to the monthly averages issued by the Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based Management Science Associates (MSA), domestic mills buying on the spot market in early August paid anywhere from $56 to $82 more per ton than they had the previous month (depending on the grade of scrap and the market region).

Both the RMDAS prompt industrial composite (consisting of No. 1 busheling, No. 1 bundles and No. 1 factory bundles) and the No. 2 shredded scrap grade moved back up to more than $400 per ton, after slipping beneath that benchmark in July.

Shredded scrap in the North Midwest region (which consists of Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, Wisconsin, the Dakotas and the northwest corner of Indiana) enjoyed the single largest price recovery, gaining $82 per ton in value in August.

Spot market prices for No. 1 heavy melting steel (HMS) remained below $400 per ton, though the August price recovery helped move the value of the grade nationally from $308 per ton in July to $368 in August.

Despite the increases, pricing did not fully return to May 2012 levels. Using national spot market averages, pricing for each of the three major grades tracked by RMDAS remains about $30 per ton below the May figures.

A Midwestern scrap recycler contacted in mid-August says a lot of material was moving through his company’s facilities in August as smaller dealers moved their inventories in response to rising prices. “Dealers needed to recoup [what they lost in June and July] and they sold a lot of scrap with this price swing,” he comments.

A trader based in the Northeast said the bidding for scrap has become competitive again, with both export brokers and domestic mills placing consistent orders for material.

On the generation side, while smaller dealers have helped provide much needed supply, it is needed in part to make up for the lagging construction and demolition sectors. “Demolition activity is flat right now,” says the Midwestern recycler. “The spring jobs are winding down, and there are very few new [projects] starting up right now.”

The Midwestern processor says he does not anticipate another wild price swing in the September buying period. “I think we’ll see a narrow range, with prices maybe having room to grow by another $20 per ton or so,” he comments.

He says the August rebound was a welcome development for scrap recyclers. “August is going to help us out,” he says. “There have been some tough months in 2012, either because of lighter scrap flows or tough margins. I think the year is going out on a positive note. Volumes have increased, and prime grades are above $400 per ton—that’s not bad.”

Steel mill output in the United States has remained relatively consistent throughout the volatile three-month period. According to the American Iron and Steel Institute (AISI), Washington, D.C., in the week ending Aug. 11, 2012, domestic raw steel production was just less than 1.9 million net tons with a capability utilization rate of 76.9 percent. That compares with production of 1.85 million tons in the week ending Aug. 11, 2011, when the capability utilization rate was 75.7 percent.

As well, the Aug. 11, 2012, weekly production was up 1.9 percent from the previous week (ending Aug. 4, 2012), when output was 1.86 million tons and the capability utilization rate was 75.4 percent.

Year-to-date, according to AISI, U.S. steel output of 61.4 million tons is demonstrating a 5.7 percent increase from the 58 million tons made during the same period in 2011.

“Mills are still running well; they need scrap,” says the Midwestern scrap recycler. He characterizes rebar mills as “running OK,” while structural mills are “not running to capacity.” Flat-rolled mills, he adds, are “doing well.”

Regarding export buying, he says “China is slow, [but] buyers from India are stepping up a little bit.”

According to export figures compiled by the U.S. Census Bureau and published by the U.S. Geological Survey, in the first five months of 2012 Turkey has been the biggest buyer of ferrous scrap exported by U.S. shippers, buying some 2.76 million tons from January through May.

Other major buyers of ferrous scrap from the U.S. have been South Korea and Taiwan (1.4 million tons each), China (1 million tons) and India (538,000 tons).

 

August 2012 Spot Pricing

 

Total U.S.

North Central/ East North Midwest    South
Prompt Industrial Composite $413 $411 $405 $420
#1 HMS $368 $363 $371 $374
#2 Shredded Scrap $408 $408 $410 $405
#2 Shredded/Change vs. Month Before +$70 +$68 +$82 +$60

After two months of falling prices, ferrous scrap processors and shippers received $60 to $70 more per ton for the grades they shipped to steel mills in August.

Reported regional aggregated spot market prices per gross ton shown for each commodity are based on all Management Science Associates (MSA), Pittsburgh, Raw Material Data Aggregation Service (RMDAS) participants’ actual order data submitted to and processed by MSA as of the 20th of each respective “buy month,” rounded to the whole integer. A map of RMDAS regions is available at http://rmdas.msa.com, as is a further explanation of RMDAS methodology and an accompanying disclaimer.

No. 2 shredded scrap is defined as containing 0.17 percent or greater copper content. The prompt industrial composite consists of an average of No. 1 bundles, No. 1 busheling and No. 1 factory bundles. Additional pricing information on each grade can be found at www.RecyclingToday.com.

© 2012 Management Science Associates Inc. All rights reserved RMDAS is a trademark of Management Science Associates Inc.

 

(Additional information on ferrous scrap, including breaking news and consuming industry reports, can be found at www.RecyclingToday.com.)

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